Dear all,

This is my first diary article for Numerical Method. First of all, I would like to thank the blog owner to provide me a platform to write about the interesting aspects that I find out as I am exploring in the HK/China market. Hopefully readers will enjoy and be able to experience the incredible journey that I am going through while exploring all aspects of economic activity that is happening in Hong Kong and China and Taiwan as well.

Key event that happened through out the weekend is that PBOC should resume RMB appreciation. To me, that is a widely expected news and government probably wants to improve the currently rather lousy sentiment in the stock market. This news probably just corresponds to the up and coming IPO of Agricultural Bank, as the government hope ABC can list in the market with a higher valuation just not to lose face.

Tonight I have spent some time looking at the consumer staple market in China, and in particular, the white spirit sector. Quite Recently, there was a new listing in HK called Silver Base (886 HK). SB is a distributor for Wuliangye, one of the largest white spirit producer in China. For the past 5 years Wuliangye lost the high end spirit battle to Moutai, as Moutai delivered much higher profit growth. So, to prepare for a huge comeback Wuliangye has spent for 10 years to develop a similar product that Moutai has been selling (there are all sorts of white spirit you can think of) so we will see how this high end white spirit battle turn out. But interesting enough,  outperformers in the market are the second tiered white spirit producers, as this is a good evidence that consumption growth in China now moves on to the less developed cities.

Having said all this, I bet young Chinese still prefer imported grape wind more these days, just like more and more Chinese eat burgers and fried chicken right?

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4 Comments

  1. It is not just the young (as in ages 10-30) Chinese are buying foreign wines. I bet a lot of rich and middle aged businessmen are buying crates of Chateau Lafite.

  2. how does RMB appreciation improve the currently rather lousy sentiment in the stock market?

  3. yes, for Chateau Lafite (just in general red wine) consumption base is still very small. Currently, firms try to build up presence and quality vineyard to spur growth. Among the companies, Changyu is a better company in the red wine business.

  4. As u find out from the week, the RMB appreciation is played out more like an expected event to the market. But in the longer run, import cost will be lower and should benefit companies who sell product in the market but source raw material from say Europe or US. But obviously bad for export stocks in general.


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